Rookie Reserve Bank of Australia (RBA) governor, Michele Bullock, stupidly chose to attack spending on dentists and hairdressers for driving up Australia’s CPI inflation.
Speaking to a room full of bank economists at the Australian Business Economists dinner on Wednesday, Bullock said that Australia’s inflation was mostly home grown and required households to pull back spending.
She warned that the growing prices of services, such as dentistry and haircuts, were a substantial concern as they were being supported by strong demand.
“The bank’s statutory objectives are economy-wide outcomes, and our key tool — the interest rate — is a blunt one,” she said.
“The remaining inflation challenge we are dealing with is increasingly homegrown and demand driven”.
“A more substantial monetary policy tightening is the right response to inflation that results from aggregate demand exceeding the economy’s potential to meet that demand”.
“Hairdressers and dentists, dining out, sporting and other recreational activities – the prices of all these services are rising strongly”.
“This reflects domestic economic conditions and is an indication that aggregate demand is sufficiently greater than aggregate supply to sustain these price increases”, she noted
So, lets all become scruffy, toothless people to keep inflation down?
Here’s a better idea, Ms Bullock. How about getting on the phone to Prime Minister Anthony Albanese and demand that he cuts immigration from its current record-breaking pace of around 500,000 people a year to a level that is below the nation’s ability to supply housing, infrastructure, business investment, and services?
Because its is going to be impossible to slow aggregate demand via rate hikes – which only really impacts one third of Australians carrying mortgages – when the population is growing at an extraordinary rate of 2.6%:
Source: Alex Joiner
Individual Australian households on average are cutting their spending. The problem is, these cutbacks are being more than offset by massive growth in the sheer number of households, thanks to extreme levels of immigration.
While you are at it, Ms Bullock, why haven’t you called-out the proflicate spending of older Australians, who most carry no mortgage, do not rent, and are unaffected by the RBA’s rate hikes nor severe rental inflation (brought about by excessive immigration)?
Source: CBA
Younger Australians are cutting back on spending heavily under the weight of mortgage repayments and rents, while older Australians are spending like drunken sailors, mostly on discretionary goods and services:
Source: CBA
Why not be honest about the inflation situation rather than calling-out spending on essentials like dentistry and haircuts?
Sadly, the new RBA governor seems more out-of-touch than the old.
Michele Bullock should be telling the federal government that the RBA only has one blunt tool that disproportionately harms just one third of Australians.
The RBA, therefore, needs the federal government to stop working at cross-purposes by juicing aggregate demand via the largest immigration program in the nation’s history.
